Serious HSA Confusion - Help!

You mean "no *employer* contribution", right? That is how you were able to contribute the max all at once, even though you changed insurance plans early in the year.

But some other company might have. HSA's and the HDHP's that go with them are designed to *not* depend on the employer.

Sounds right.

How much did you withdraw? What were your medical expenses?

Qualified distributions from an HSA are not taxable. The fact you did not receive a statement is probably not an issue, if the facts are documented.

You're welcome.

-Mark Bole

[Second reply - meant to be additional to the first]

What day did you leave in March? If March 2 or later, then March counts as a month you may contribute. Only if you left on March 1 or earlier does the month not count. If there was a gap where you received unemployment compensation, other months may count.

Eligibility status is determined for a month based on the first day of the month.

Excess contribution = $2,900.00 * (non-qualfied months / 12).

According to TT I was allowed to have a $633.00 for the two months I was qualified.

My medical expenses were less than that. I'm not concerned about.

My question is about the amount that I had to withdraw (this year) as an 'excessive' contribution. And what about the interest I earned on that amount?

Do I report that now? Do I report that on next year's taxes when I get a

1099 (or whatever the statement is regarding my HSA).?? Is there a penalty of some kind?

Bonnie

You will need to work through Form 8889 and instructions on page 5 regarding excess contributions, these are downloadable or viewable at

If you withdraw the excess contribution (which you calculate as previously discussed) before the due date of your return including extensions, and you do not try to deduct it from income, it simply does not get shown as an amount contributed on Form 8889, therefore it does not show as an excess contribution.

Try to get an updated 1099-SA for 2008 if you can, but it may not be until the end of the 2009 tax year that you get one. Form 1099-SA has a box 2 amount for earnings on excess contributions included in box 1, and a code 2 for same. You include this as "Other income" on your tax return (Form 1040 Line 21). You should include a statement explaining the amounts you used if different from the 1099-SA that was issued.

According to the instructions, the earnings on the amount withdrawn are calculated using the same procedure as applies to IRA withdrawals of contributions.

-Mark Bole

Thank you.

I just worked form 8889 from the IRS website. I basically need to withdraw whatever is left in my HSA (it turns out I was only qualified for one month since I didn't deposit the money until Feb, and was gone from that job on Feb 25th).

So I need to claim as income the interest I earned for the rest of 2008 on that account, and the initial deposit I made will not be taxed (since it already was).

Next year's taxes may be messy however, because in January of this year I used some of the money (more than I was allowed because I was only eligible for one month) for medical expenses.

I guess the important thing is pay taxes on the earned interest. Maybe the rest won't matter - except for how to explain it to the IRS!

Thanks again,

Bonnie

You actually have up to April 15th of the following year to contribute to an HSA, so *when* you contribute the money does not determine your eligibility (although your employer plan might have extra administrative rules regarding payroll deductions into an HSA).

So it sounds like you had a modest amount of unreimbursed medical expenses that will not give you any tax benefit, this is quite common.

I'm guessing you will get a 2009 1099-SA a year from now. If you have already accounted for everything properly on the 2008 return, you should be able to simply attach a brief explanation to your return for 2009. Although HSA's are very similar to IRA's, it does not appear that the information forms for HSA's support the variety of distribution codes available for IRA's to correctly report multi-year transactions.

-Mark Bole

Why would an "updated" 1099-HSA be needed? The document isn't due until May 31.

If you worked on that job in both Jan and Feb (as you stated in your original post), you were "qualiried" for *both* Jamnuary & February, no matter when you put money into the HSA account.

My high deductible Health plan began Jan 1 2008. However, I didn't open and fund the HSA until Feb. My impression from reading the IRS HSA Publication was that the HSA is not retro-active. The HSA would only take effect at the time I opened it and deposited money. For example, I could not use the HSA for medical expenses in January. Is that not correct? So I'm only qualified for February??

It is incredibly confusing. Reading that Publication, it seems like the IRS contradicts itself sometimes.

Thanks for your help.

Bonnie

Form 1099-SA (not HSA) file from IRS states the following:

"Due dates. Furnish Copy B of this form to the recipient by February 2, 2009. File Copy A of this form with the IRS by March 2, 2009. If you file electronically, the due date is March 31, 2009."

Believe me, I looked it up before I posted.

There does not seem to be the same fleshed-out set of codes and such to handle "distributions" (return of excess contributions) that occur following the tax year for which the amount applies.

Or to put it another way, since the OP took the money out in 2009, what do you expect would show up on her 2008 1099-SA form, whenever it is received? Is there any way to avoid an amendment or extension of the tax return in this case, short of writing a statement to explain everything and then ignoring the 1099-SA for 2009?

-Mark Bole

I did not get a 1099-SA at all for 2008. I didn't use the money for any medical expenses, or withdraw the excess until 2009.

If I should have gotten one anyway, I can check with my Credit Union (with whom I have the HSA)?

Bonnie